Ten-year U.S. note yields rose five basis points to 1.67
percent at 4 p.m. in New York, a second straight increase.
The Standard & Poor’s 500 Index closed up less than 0.1 percent
at 1,387.82 after retreating as much as 0.7 percent. France’s
10-year bond yields climbed eight basis points to 2.15 percent
after Moody’s Investors Service cut the nation’s credit rating.
Oil plunged on optimism that fighting will subside between
Israel and Palestinian groups.

Federal Reserve Chairman Ben S. Bernanke said an agreement
on ways to reduce long-term federal budget deficits would remove
an impediment to growth, while failure to avoid the so-called
fiscal cliff would pose a “substantial threat” to the
recovery. The S&P 500 has fallen as much as 5.3 percent since
the Nov. 6 election set up a budget showdown between President
Barack Obama and the Republican-controlled House.

“A majority of traders are taking chips off the table,”
said Michael Franzese, senior vice president of fixed-income
trading at ED&F Man Capital Markets in New York. “If they reach
an agreement, Treasuries will go up in yields.”

Two-year Treasury yields increased one basis point to 0.25
percent, while rates on 30-year bonds climbed six basis points
to 2.82 percent.

Homebuilders Rally

U.S. benchmark equity indexes fluctuated throughout the
day. An S&P gauge of 11 homebuilders jumped 3.3 percent, with
PulteGroup Inc. and Lennar Corp. pacing gains. Housing starts
rose 3.6 percent to a 894,000 annual rate, the fastest since
July 2008 and exceeding all estimates in a Bloomberg survey,
Commerce Department figures showed.

The S&P 500 surged 2 percent yesterday, the most in two
months, amid optimism that U.S. lawmakers will reach an
agreement to avoid the fiscal cliff of $607 billion in spending
cuts and tax increases will go into effect next year if a budget
deal is not reached.

Indexes of health-care, financial and consumer-discretionary companies climbed more than 0.5 percent to lead
gains in six of the 10 main industry groups in the S&P 500,
while technology and energy shares fell the most.

Best Buy Co., the electronics retailer being evaluated for
a takeover by its founder, sank 13 percent after posting a $10
million quarterly loss as sales at established stores fell more
than expected. Hewlett-Packard tumbled 12 percent after taking a
$8.8 billion impairment on last year’s acquisition of Autonomy
Corp., the British software maker that it accuses of falsifying
finances.

Intel Corp. dropped 3.6 percent after UBS AG cut its rating
for the largest chipmaker.

‘Structural Rigidities’

The 17-nation euro was little changed at $1.2818, while the
additional yield investors demand to hold French 10-year bonds
instead of benchmark German bunds widened 1.6 basis points to 73
basis points.

“France’s fiscal outlook is uncertain as a result of its
deteriorating economic prospects, both in the short term due to
subdued domestic and external demand” and “structural
rigidities” in the longer term, Moody’s said. France was cut
one level to AA+ from AAA by S&P on Jan. 13.

The yield on France’s two-year notes jumped four basis
points to 0.15 percent. Moody’s cut France to Aa1 from Aaa and
kept a negative outlook for Europe’s second-largest economy.

“The downgrade raises concerns about the structure of the
euro zone and adds more of a burden on to the shoulders of
German sovereign creditworthiness,” said John Wraith, a fixed-income strategist at Bank of America Merrill Lynch in London.
“It’s another sign that things continue to deteriorate in
Europe.”

Banks had the biggest decline in the Stoxx 600, falling 0.5
percent as a group. Credit Suisse Group AG, the second-biggest
Swiss bank, slid 1.7 percent after saying it will reorganize its
investment bank and merge asset management with the private bank
to cut costs.

Euro-area finance ministers met today to try to plug a hole
in Greece’s public accounts. Recycling European Central Bank
returns on Greek bonds, charging the country lower interest
rates and extending repayment deadlines are among the options
under consideration today for filling a new gap in Greece’s
public accounts.

Europe Meetings

Officials said today’s meeting, starting at 5 p.m. in
Brussels, won’t make a final decision to release the next
tranche of aid to Greece, partly because parliaments in Germany,
the Netherlands and Finland have yet to weigh in. Greek 10-year
bonds rose for an eighth day, pushing the yield 13 basis points
lower to 17.099 percent.

Crude for January delivery declined 2.8 percent to $86.75 a
barrel on the New York Mercantile Exchange after Hamas said a
draft accord for a cease-fire that would end fighting between
Israel and Palestinian groups in the Gaza Strip is almost ready.
Futures climbed 3 percent yesterday as Israeli ground forces
honed preparations to enter the Gaza Strip for the first time in
almost four years.

The MSCI Emerging Markets Index added 0.2 percent, with
technology companies climbing 1.4 percent as a group to lead
gains.

Olam International Ltd., the commodities trader part owned
by Singapore’s state-owned investment company, tumbled 7.5
percent in the city-state after short-seller Carson Block
questioned the company’s accounting methods. Olam “strongly
rejects the assertions,” the company said in a statement.

The yield on Australia’s 10-year bonds rose seven basis
points to 3.16 percent at the close of trading in Sydney.
Central bank Governor Glenn Stevens said it was prudent to keep
the nation’s benchmark interest rate unchanged “for the
moment” as policy makers monitor the impact of previous
reductions on the economy.